Yesterday, I asked my husband when we were going to start saving for our kids’ college tuition. “Not right now, honey. Later.” We have two toddlers, so you could argue that we have time on our side. I’d like to make the case, to the contrary. Life’s big issues, relegated to the land of later, have a way of sneaking up on us.

Maybe you’ve been meaning to get up to speed on the 529 College Savings Plans, but you simply haven’t found the time to take the next step. I feel your pain. We’re busy with work, family, and of course, that quaint old fixer-upper that charmed us right out of our senses, not to mention our free time when we bought it. Long story short, I have my HVAC guys on speed-dial. Bottom line? There always seems to be some pressing issue that has to be handled–now.

So, what about the things you need to take care of for your future? Often, they just fall off the radar screen. You tell yourself they can wait, right? You’ll get to it later. Wrong. Most tasks that people put off simply never get done, which is a shame. Because once college time rolls around for your son or daughter, paying tuition will have become one of those urgent matters that demand your attention–now.

Planning for the future is preventative maintenance. Procrastination, more than any other factor, is the culprit that leaves many parents holding the bag when it’s time to put children through college. Don’t let it happen to you.

So, what are you waiting for? Get going today! Put saving for college on your to-do list, along with dinner, soccer practice, and feeding the fish. Only today, put it at the top of your agenda. Check out 401kid.com and educate yourself about the 529 College Savings Plans. It will help you prepare for your child’s educational future. Will you feel glad you did? You bet your bottom dollar!

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I have three wonderful grandchildren. While some might argue it’s too soon to think about college, with the oldest being 6-years old and the youngest 2, I’m of a generation that believes it’s never too early to plan for the future.

I worked hard all my life, saved money and planned for my retirement. Now, I’d like to see the fruits of my labor and wise investment choices pay off for my grand kids. I’ve spoken with friends and my financial planner (my estate is valued at 2.5 million), but still am not clear on the best way to proceed that factors in the yearly climb of tuition fees and living expenses.

The merits of 529 plans have arisen repeatedly in our conversations, but I’m not sure if it’s the best choice. I want to leave the legacy of a great education to the next generation, but what if some of them decide not to attend college. My wish is for all of them to go, but one never knows what the future holds. What would happen to a saving plan should one or all decide against college?

One of my golf buddies recommended I visit your site in an effort to clarify my savings options. What does 401Kid advise?

Sincerely,
Generous Grandfather

Thank you for writing. You ask some great questions. Here are some answers. For families of similar means, 401kid can remove contributions and any future earnings from your taxable estate and maintain control of the money if you are the 529 Plan account owner.

Additionally, there are several gift tax benefits of which you might take advantage. You can give monetary gifts to anyone without owing gift tax, as long as gifts do not exceed annual exclusion amounts. This is true of contributions to a 529 Plan. There is an additional benefit, specific to 529 Plans, that allows you to contribute a large amount of money free of gift tax in a single year.

Annually, you may contribute up to $12,000 per student (or annually up to $24,000 per student if you and your spouse contribute) without being subject to gift tax, or contribute up to $60,000 per student in a single year (or up to $120,000 per student in a single year if you and your spouse contribute) without owing any gift tax.

This is a unique feature of 529 Plans. You will need to file a gift tax return and treat the gift as if it were made in equal payments over 5 years. To avoid gift tax, you should make no additional gifts to the student during that 5-year period. If you spread out your contribution over 5 years for gift tax purposes, a portion of the gift would return to your estate in the event of your death during the five-year period.

A 529 Plan is a great way to invest for future college expenses, but it also offers benefits for estate planning. If your gross estate is valued at greater than the applicable exclusion amount of $2,000,000 for federal estate taxes for 2006, you may be looking for ways to reduce its value in order to minimize or avoid estate tax for the beneficiaries of your estate.

A 529 Plan allows you to remove contributions and future earnings from your taxable estate and maintain control of the money if you are the 529 Plan account owner. This combination of factors is unique to 529 Plans. With other types of accounts, if you maintain control of the assets, the money is considered part of your estate.

Grandparents need to keep the federal generation-skipping transfer tax (GST Tax) in mind when contributing to a grandchild’s 529 account. The GST Tax is a tax on transfers made during your life and at your death to someone who is more than one generation below you, such as a grandchild. The GST Tax is imposed in addition to (not instead of) federal gift and estate taxes. Like the applicable exclusion amount, though, there is a GST Tax exemption, which is $2 million in 2006. No GST Tax will be due until you’ve used up your GST Tax exemption, and no gift tax will be due until you’ve used up your applicable exclusion amount.

A 529 Plan may allow you to invest for future college expenses while you take advantage of estate planning and gift tax benefits. You should talk with your tax or legal adviser for information specific to your tax situation and investment planning. The availability of tax or other benefits may be conditioned on meeting certain requirements. Non-qualified withdrawals are subject to federal and state income taxes and a 10% penalty.

Please visit www.401kid.com/MediaCenter/The Grand Education Savings Plan_021505.pdf for more information. I hope this is helpful and thanks for taking the time to write.

Kind Regards,

Dr. Tara J. Palmatier, Psy.D.

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These are the the wise words of Jim Boyle, President of College Parents of America, that always seem to elicit a smile whenever he speaks to a group of parents of younger children. Here are some of Jim’s other comments:

“I guess the simplicity of the line, and the fact that college for their kids is more concept than reality, makes these parents of small kids focus on the “before” part and nod in knowing recognition that if they can save enough money over the next 10 or 12 or 18 years, then in their minds “college will be taken care of” and they can keep a lifestyle as good or better than the one they have right now.

But then, as you well know, reality hits. The assumption of a progressively increasing income may prove wrong, as an employer takes a tumble. The comfort of a backstop from your parents may disappear, as they hold too long to a home they can’t sell, or an unexpected long-term medical crisis ensues, and you end up footing the bill.

That’s where the “during and after” part of paying for college kicks in, and where I surmise that you are probably spending your life right now.

If you are the parent of a current college student, you are probably struggling to pay for college in real time - or “during” - these four, or five or six years when your son or daughter is earnestly taking a full load of undergraduate classes and trying to earn enough money themselves to make a real dent in the bills that seem to just keep on coming from his or her college or university.

And you are learning, of course, that reality hits yet again, and that neither nor child nor you can earn enough money to pay for college in real time, and that borrowing money for college expenses is really the only possible way that you together will be able to make the bills for tuition, room and board, books, fees, travel to and from school and all of the other expenses that hit because you have a child striving to attain a higher education.

So, you as a parent borrow money, and before long you will enter the “after” life and have to start to pay it back, sometimes beginning in 60 days, sometimes at the end of each school year or, in some cases, not until the end of his or undergraduate education. Or in the case of your son or daughter, he or she may borrow money and commit to paying that loan back beginning six months after graduation.

But you may done all this without much of a strategy (and believe me you are not alone), so some of your joy in experiencing your child’s college years is tempered by that nagging feeling that you are just not doing enough to learn options and make smart decisions about paying for college.”

401kid can help families create a tax advantaged Education Savings program so they front load the “before” part of paying for college. By doing so, the college experience becomes more enjoyable and stress-free for all!

see College Parents of America

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401kid was created with the consumer in mind. Namely, we provide education savings plans at a low cost; we do not compromise our objectivity by accepting fees from investment managers; and we offer clients access to superior techology.

SogoInvest is a like-minded, consumer-conscious company. Genesis Securities, through its new unit SogoInvest, offers investors 15 free trades a month after paying a $15 a month fee with no account minimum required. Investors unwilling to pay the monthly fee can still conduct trades for $3 each. SogoInvest’s founder and chairman, William Yeh, says the unit is targeting individual investors interested in developing long-term investment strategies. With this bold strategy, SogoInvest will become a leading voice in the investment community.

Here are some links of interest:

SogoInvest

Evolution Shift

Blueliner Marketing

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These are the the wise words of Jim Boyle, President of College Parents of America, that always seem to elicit a smile whenever he speaks to a group of parents of younger children. Here are some of Jim’s other comments:

“I guess the simplicity of the line, and the fact that college for their kids is more concept than reality, makes these parents of small kids focus on the “before” part and nod in knowing recognition that if they can save enough money over the next 10 or 12 or 18 years, then in their minds “college will be taken care of” and they can keep a lifestyle as good or better than the one they have right now.

But then, as you well know, reality hits. The assumption of a progressively increasing income may prove wrong, as an employer takes a tumble. The comfort of a backstop from your parents may disappear, as they hold too long to a home they can’t sell, or an unexpected long-term medical crisis ensues, and you end up footing the bill.

That’s where the “during and after” part of paying for college kicks in, and where I surmise that you are probably spending your life right now.

If you are the parent of a current college student, you are probably struggling to pay for college in real time - or “during” - these four, or five or six years when your son or daughter is earnestly taking a full load of undergraduate classes and trying to earn enough money themselves to make a real dent in the bills that seem to just keep on coming from his or her college or university.

And you are learning, of course, that reality hits yet again, and that neither nor child nor you can earn enough money to pay for college in real time, and that borrowing money for college expenses is really the only possible way that you together will be able to make the bills for tuition, room and board, books, fees, travel to and from school and all of the other expenses that hit because you have a child striving to attain a higher education.

So, you as a parent borrow money, and before long you will enter the “after” life and have to start to pay it back, sometimes beginning in 60 days, sometimes at the end of each school year or, in some cases, not until the end of his or undergraduate education. Or in the case of your son or daughter, he or she may borrow money and commit to paying that loan back beginning six months after graduation.

But you may done all this without much of a strategy (and believe me you are not alone), so some of your joy in experiencing your child’s college years is tempered by that nagging feeling that you are just not doing enough to learn options and make smart decisions about paying for college.”

401kid can help families create a tax advantaged Education Savings program so they front load the “before” part of paying for college. By doing so, the college experience becomes more enjoyable and stress-free for all!

see College Parents of America

Bookmark :